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Here's Why You Should Retain West Pharmaceutical (WST) Now
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West Pharmaceutical Services, Inc. (WST - Free Report) is well-poised for growth, backed by the robust Proprietary Products segment and the sustained strength in research and development (R&D). However, the foreign exchange volatility remains a woe.
Shares of this Zacks Rank #3 (Hold) company have surged 39.4% compared with the industry’s growth of 11.4% in a year. The S&P 500 Index has rallied 11.7% in the same period.
West Pharmaceutical — with a market capitalization of $27.69 billion — is a leading global manufacturer concerning the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. It anticipates earnings to improve 29.9% over the next five years. The company has a trailing four-quarter earnings surprise of 26.3%, on average.
Key Catalysts
The proprietary products business continues to exhibit sustained strength and is an important contributor to WST’s top line. This segment’s customers primarily comprise several of the major biologic, generic and pharmaceutical drug companies globally that incorporate components and other offerings into their injectable products for distribution to patients.
In the fourth quarter of 2021, sales at this segment improved 36.8% organically due to the double-digit growth in high-value products (HVP) (which made up 74% of sales in the quarter) and the strong momentum throughout all market units in the quarter under review. The biologics market unit reported solid double-digit growth, driven by the Westar and NovaPure components. The generics and pharma market units saw double-digit growth, led by sales of the FluroTec and Westar components.
The margin expansion in this segment has been encouraging. The fourth-quarter gross profit margin witnessed an expansion of 460 basis points on a year-over-year basis, driven by a favorable mix of products sold (stemming from demand in HVP), production efficiencies and an increase in sales price.
Image Source: Zacks Investment Research
West Pharmaceutical maintains its research-scale production facilities and laboratories for creating new products and provides contract engineering design and development services to help customers with new product developments.
The company continues to pursue innovative strategic platforms in prefillable syringes, injectable containers, advanced injections, and safety and administration systems. In the fourth quarter of 2021, the company’s R&D expenses increased 6.2% from the prior-year quarter. West Pharmaceutical remains committed to seeking new innovative opportunities for the acquisition, licensing, partnering or development of products, services and technologies. WST is focused on its objective to connect dots throughout science and technology to fulfill ideas for potential value creation.
Factor Hurting the Stock
The growing exposure to international markets makes the company susceptible to adverse foreign exchange volatility. Unfavorable fluctuations in currency exchange rates can affect West Pharmaceutical’s international sales. Per the fourth-quarter 2021 earnings call, the projected forex headwind on earnings per share has an impact of approximately 21 cents for 2022 (based on current foreign currency exchange rates).
Estimates Trend
West Pharmaceutical has been witnessing an upward estimate revision trend for 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 2.9% to $9.28 per share.
The Zacks Consensus Estimate for 2022 revenues is pegged at $3.06 billion, suggesting growth of 8.1% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 20%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 8.8% compares favorably with the industry’s 0.3%.
Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 25.5%. The company currently sports a Zacks Rank #2 (Buy).
Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 5.6% compares favorably with the industry’s 4.1%.
McKesson surpassed earnings estimates in each of the trailing four quarters, the average surprise being 20.6%. The company currently carries a Zacks Rank #2.
McKesson’s long-term earnings growth rate is estimated at 11.8%. MCK’s earnings yield of 8.8% compares favorably with the industry’s 4.1%.
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Here's Why You Should Retain West Pharmaceutical (WST) Now
West Pharmaceutical Services, Inc. (WST - Free Report) is well-poised for growth, backed by the robust Proprietary Products segment and the sustained strength in research and development (R&D). However, the foreign exchange volatility remains a woe.
Shares of this Zacks Rank #3 (Hold) company have surged 39.4% compared with the industry’s growth of 11.4% in a year. The S&P 500 Index has rallied 11.7% in the same period.
West Pharmaceutical — with a market capitalization of $27.69 billion — is a leading global manufacturer concerning the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. It anticipates earnings to improve 29.9% over the next five years. The company has a trailing four-quarter earnings surprise of 26.3%, on average.
Key Catalysts
The proprietary products business continues to exhibit sustained strength and is an important contributor to WST’s top line. This segment’s customers primarily comprise several of the major biologic, generic and pharmaceutical drug companies globally that incorporate components and other offerings into their injectable products for distribution to patients.
In the fourth quarter of 2021, sales at this segment improved 36.8% organically due to the double-digit growth in high-value products (HVP) (which made up 74% of sales in the quarter) and the strong momentum throughout all market units in the quarter under review. The biologics market unit reported solid double-digit growth, driven by the Westar and NovaPure components. The generics and pharma market units saw double-digit growth, led by sales of the FluroTec and Westar components.
The margin expansion in this segment has been encouraging. The fourth-quarter gross profit margin witnessed an expansion of 460 basis points on a year-over-year basis, driven by a favorable mix of products sold (stemming from demand in HVP), production efficiencies and an increase in sales price.
Image Source: Zacks Investment Research
West Pharmaceutical maintains its research-scale production facilities and laboratories for creating new products and provides contract engineering design and development services to help customers with new product developments.
The company continues to pursue innovative strategic platforms in prefillable syringes, injectable containers, advanced injections, and safety and administration systems. In the fourth quarter of 2021, the company’s R&D expenses increased 6.2% from the prior-year quarter. West Pharmaceutical remains committed to seeking new innovative opportunities for the acquisition, licensing, partnering or development of products, services and technologies. WST is focused on its objective to connect dots throughout science and technology to fulfill ideas for potential value creation.
Factor Hurting the Stock
The growing exposure to international markets makes the company susceptible to adverse foreign exchange volatility. Unfavorable fluctuations in currency exchange rates can affect West Pharmaceutical’s international sales. Per the fourth-quarter 2021 earnings call, the projected forex headwind on earnings per share has an impact of approximately 21 cents for 2022 (based on current foreign currency exchange rates).
Estimates Trend
West Pharmaceutical has been witnessing an upward estimate revision trend for 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 2.9% to $9.28 per share.
The Zacks Consensus Estimate for 2022 revenues is pegged at $3.06 billion, suggesting growth of 8.1% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 20%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 8.8% compares favorably with the industry’s 0.3%.
Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 25.5%. The company currently sports a Zacks Rank #2 (Buy).
Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 5.6% compares favorably with the industry’s 4.1%.
McKesson surpassed earnings estimates in each of the trailing four quarters, the average surprise being 20.6%. The company currently carries a Zacks Rank #2.
McKesson’s long-term earnings growth rate is estimated at 11.8%. MCK’s earnings yield of 8.8% compares favorably with the industry’s 4.1%.